Financial inclusion is a broad term that refers to the access to adequate and affordable financial services. For a person to be regarded as financially included she must have access to affordable financial
services in a manner that is convenient to her and adequately addresses her needs. Financial literacy forms a core pillar of financial inclusion as it is a pre-requisite for a person to be financially included. Absent financial literacy, the cost a financial institution would incur acquiring a customer would be substantially higher. In the context of insurance, acquiring a customer who is not financially literate often increases the risk of acquiring customers who are more inclined to make fraudulent claims.

Financial inclusion can be loosely broken down into four key issues; i.) access to a bank account, ii.) access
to credit, iii.) access to insurance and iv.) access to institutions providing payment and remittance services.
The inability to fully access these services has knock-on effects on people. If for example, an
individual does not have access to a bank account, generally the individual will not have
access to an effective method to manage her money, will probably not have access to short-term
credit and will not have a credit history. This shows the extent in which a lack of access to one financial service has a knock on effect on other areas of an individual’s life.

In the African context, there are several barriers that have an adverse effect on financial inclusion.
These barriers range from; infrastructural constraints, to monetary barriers (people earning too little money
and in an infrequent manner) and a lack of relevant documentation. In many cases these barriers are
applicable to all financial services. A lack of ID documentation for example, because of KYC laws
limits one’s ability to open a bank account, to acquire insurance cover through a mainstream
insurance provider and to make or receive payments through an established financial institution.
In turn this limits an individuals ability to build a credit history thus limiting her ability to acquire credit.

To address these barriers numerous tech start-ups around Africa are developing a wide variety of solutions that
either disrupt the status quo such as peer to peer insurance that re-imagines the insurance process, or
offer incremental improvements to existing market players such as digital banking that allows people to
open a bank account even though they cannot visit a nearby bank branch. In future posts these digital solutions will be discussed in greater detail, with greater insight on the key takeaways from these innovators that can be used to transform your business.